Clarifications on the provisions relating to depreciation under the Companies Act, 1956, as amended by the Companies (Amendment) Act, 1988

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..... ng queries from different quarters on the subject mentioned above, from time to time, and, accordingly, the following clarifications are issued:-- (1) Date on which the new provisions relating to depreciation become effective: The Companies (Amendment) Act, 1988, specifically provides that Schedule XIV shall be deemed to have come into force on April 2, 1987. The amended provisions of section 20 .....

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..... e is a change in the rates of depreciation later on (as against the position of the Department's earlier circular of 1985 on the subject). It is argued that as far as the existing assets are concerned, the companies can follow either of the two circulars. An option under the 1956 circular would thus be available to the companies as at present not recomputing the specified period where the Straight .....

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..... ed in the Schedule. On this basis, it is suggested that a company can charge depreciation at rates which are lower or higher than those specified in Schedule XIV. It may be clarified that the rates as contained in Schedule XIV should be viewed as the minimum rates, and, therefore, a company shall not be permitted to charge depreciation at rates lower than those specified in the Schedule in relati .....

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..... oned that the rate of 11.31 per cent. has been determined on the basis of eight years and six months or so of specified period whereas if 95 per cent. is divided by nine years, the corresponding SLM rate comes to 10.56 per cent. The argument is that for calculating the SLM rates, complete years have to be taken into account whereas the rates under Schedule XIV also take into account fractions of y .....

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